Anna Nicole Smith’s tragic death (see here) put a spotlight once again on the record-shattering trust-and-estates litigation she and her former step-son, E. Pierce Marshall (he died in 2006), waged over the vast estate of her former husband, J. Howard Marshall. As I’ve previously written about on this blog, this case resulted in a U.S. Supreme Court decision, Marshall v. Marshall, viewed by many (including me) as opening the federal court room doors to trust-and-estates litigation to an extent we’ve never seen before (see here).
So the timing of an article appearing in the January/February edition of the ABA’s Probate and Property magazine written by California trust-and-estates litigator Dominic J. Campisi was almost eerily prescient. This article deserves notice by trust-and-estates litigators everywhere. In Marshall v. Marshall — Rashomon Revisited Campisi does a good job of articulating why this case should be viewed as part of a general trend towards greater federal court involvement in trust-and-estates disputes. Here’s the conclusion to Campisi’s article, summing up his views nicely:
J. Howard Marshall, who had taught wills and trusts at Yale Law School, certainly has provided a most intriguing case study for future generations of law students and practitioners. The price of a unanimous decision such as Marshall is that many contentious issues are left unresolved in order to reach a common decision. The lower courts continue to wrangle over attempts to use federal diversity jurisdiction for probate and trust disputes based on the general conclusions in Marshall.
In Hoffman v. Sumner, No. 05-C7114, 2006 WL 1444677 (N.D. Ill. May 18, 2006), the court followed Marshall in denying remand of a diversity case involving a dispute over a joint tenancy asset, holding that the dispute did not violate the probate exception, and rejected the suggestion that it should abstain in favor of the local probate court. The bankruptcy court in In re Enron Corp. v. Whalen, 351 B.R. 305 (Bankr. S.D.N.Y. 2006), held that an action to recover an allegedly improper transfer from the estate of a decedent was not covered by the probate exception because there was no interference with the res in the possession of the state court. The court explained that any federal judgment could subsequently be enforced in the probate action.
Judge Richard Posner in Jones v. Brennan, 465 F.3d 304 (7th Cir. 2006), distinguished between a claim brought concerning the conduct of the Cook County Probate Court in a pending dispute, holding:
That clearly would violate the probate exception. Marshall v. Marshall, supra, 126 S. Ct. at 1748. But she is also accusing the guardians of having mismanaged the estate, and as an heir she may have a claim for breach of fiduciary duty by them. . . . Such a claim does not ask the court in which it is filed to administer the estate, but rather to impose tort liability on the guardians for breach of fiduciary duty.
465 F. 3d at 307–08 (citations omitted).
In Burt v. Rhode Island Hospital Trust National Bank, No. C.A. PC/022243, 2006 WL 2089254 (R.I. Super. July 26, 2006), the court followed Marshall in holding that a breach of fiduciary duty claim against an executor was not within the limited jurisdiction of the probate court and could be heard in the Rhode Island general jurisdiction court instead.
In Bedree v. Lebamoff, No. 05-2258, 2006 WL 2860575 (7th Cir. Sept. 27, 2006), the Seventh Circuit held in a federal question case that
[t]he claim against the probate commissioner confronts another jurisdictional bar: the probate exception to federal jurisdiction. . . . And Bedree’s request for the district court to remedy what he perceives as errors in the state court’s administration of the estate, like the plaintiff’s request in Jones is the equivalent to asking the district court to take over administration of the estate. . . . This violates the probate exception even under the Supreme Court’s narrowed construction of the exception in Marshall. See, Marshall, 126 S.Ct. at 1748 (limited probate exception to proscribe only “disturb[ing] or affect[ing] the possession of property in the custody of a state court”). . . . The breach of fiduciary duty claim, on the other hand, is not barred by the probate exception because it need not necessarily affect the administration of the estate. See Marshall, 126 S. Ct. at 1748; Jones, 2006 WL 2337610, at *3.
2006 WL 2860575 at *2.